Is it a reasonable request?

How often has one of your clients entered into an insolvency event while owing you money?  If that is not bad enough, you then get the insolvency practitioner appointed (“IP”) demanding that you provide swathes of information and documents, at your expense.

Some IPs will inform you of your duty under section 234 Insolvency Act 1986 to deliver up the information sought and, most likely, failure to comply may lead to a court application.  Indeed, if they really wanted to get heavy they could point out the court ruled, in 2014, that you have a public duty to deliver up, irrespective of the cost to you.

The question is whether you should allow salt to be rubbed in by suffering more expense in addition to the unpaid fees you have already suffered.

What an IP will not be in a hurry to inform you is the requests for delivery up of records has to be justified and reasonable.  In a recent court case, in throwing the liquidators’ application out, the court said,

“any application for delivery of documents under the IA 86 should clearly explain why such documents are “reasonably required” and should not be unduly broad or burdensome to carry out.”

Indeed, we have seen sight of an information request with standard requests together with the following:

“Copies of any emails between you and the Company, including its officers.”  At PBC, we question if this request is reasonably required given the arduous task of collating this information, not least GDPR concerns, as some emails may not just deal with company matters but also, personal affairs of company officers.

So, if you are the recipient of a delivery up request from an IP, ask yourself is it a reasonable and justified request?  If in doubt then reply to the IP and ask for their reasoning behind the request.

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Members’ Voluntary Liquidations – 3 Month Countdown!

Given the recent changes on the rate of CGT that applies to Business Asset Disposal Relief on the lifetime allowance of £1Million, the 3-month clock is ticking to benefit for the current rate of 10% until 5 April 2025 on capital distributions.

The above could be a significant tax saving for you or your clients between now and then and, if this is being considered,  the time to start acting and planning is now.

Should you wish to discuss a Members’ Voluntary Liquidation further  then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk.

What does saving 4% mean to you/your clients?

Now the Budget has been and gone we have some certainty, for the next couple of years at least, on the rate of CGT that applies to Business Asset Disposal Relief which is detailed below on the lifetime allowance of £1Million:

  • 10% on disposals until 5 April 2025
  • 14% on or after 6 April 2025
  • 18% on or after 6 April 2026

Should you or your clients be incentivised by the potential saving and would like to explore a Members Voluntary Liquidation, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Are we the best?  PBC let you have your say.

With the unrivalled level of experience available at PBC, we could easily say we are the best people to approach when you are having financial issues, whether that is your own or you are a creditor of someone else suffering a demise.

The fact is, we do not make such claims; we let others express their own opinion such as:

“Gary and his team at PBC are fantastic and they go above and beyond to support you every step of the way through challenging times. Highly recommended. Thank you to Gary and PBC for helping me to get my life back and hopefully some much needed sleep after months of worry.” Director, Northampton

“I can’t recommend Ian enough he’s been amazing with the closing of my business. He reassured and put my mind at ease talking me through step by step and what needs priority etc I didn’t know where to even start but with Ian’s guidance it made everything so much less of a worry to deal with. He was always at the end of the phone if I had any concerns or worries. Making the decision to close your own business is not an easy decision to make but Ian put everything into perspective. I can’t thank you enough Ian for all your help and guidance Thank you.”  Director, Kettering

“Myself and my fellow directors are very grateful for all the assistance Natasha has given as the MVL has progressed. It has all gone far more smoothly than we could have hoped. We definitely made the correct decision when we elected to appoint PBC to act for us”.  Director, Wellingborough

“My financial crisis stirred a myriad of emotions, most of which were negative and soul destroying. Thank heavens for some sound, honest and clear advice which straightened me out and, in reality, showed me it wasn’t half as bad as I thought.”  Director, Rushden

“Good morning Claire, I just wanted to say thank you for the work you have done on the liquidation.   Super efficient and communicative which was greatly appreciated”. Director of a solvent company.

At PBC we recognise the human side of what financial difficulties often create and put that added service into the process to ensure clients are fully aware of the surrounding issues and what they actually mean to them in an easy-to-understand manner.

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Hit by the collapse of ISG? We are here to help!

The collapse of ISG into Administration will have a significant effect of many in the supply chain with monies owed not being paid any time soon or potentially not at all. 

If the loss of income is likely to mean financial difficulties going forward it is imperative to take advice and try not to panic.

Whilst undoubtedly the Administrators of ISG have a strategy in mind, it is likely to be a few months before the anticipated financial outcome will become public knowledge. All we know so far is some 2,200 employees were made redundant, with 200 employees retained to assist the Administrators.

Below is guidance to supply chain members until the financial outcome of the matter becomes more visible.

  • If you are struggling to pay your suppliers, communicate with them early, explaining the position. This should also include HMRC. We would expect they will be under some form of guidance to help as best as possible in this particular matter. 
  • If you are asked to complete work for the Administrator, look to leverage your position in this scenario. Payment up front or even better payment of part of all your old debt to continue working. Understand your importance to the Administrator if this request is made. 
  • Retention of Title Clauses – For companies that have supplied goods, look at your retention of title clauses. This may enable you to recover your products.
  • Trade Credit Insurance – if you have this make a claim immediately.
  • Take advice from your accountant/solicitors or even an Insolvency Practitioner to see what options are available.

At PBC Business Recovery & Insolvency we advise companies daily and,  first and foremost, aways look at recovery options for those we advise – trying to prevent them entering a similar process to that of ISG.  Sometimes, this is unavoidable, but the sooner advice is sought the greater the opportunities are.

If you need any advice or assistance on any corporate recovery option or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Record fines at British Home Stores.

Some may remember the demise of the BHS Group as shops around the country closed down, following the group entering into administration in April 2016.

Move on eight years and the court has imposed a record £110,230,000 compensation order against two of the former directors. Yes, £110 million!

The commentary surrounding the BHS court hearings   are far too long for this narrative.  However, it can be summed up by saying any director whose company is facing distress must act rationally, assess the impact of their decision making and avoid, “Wishful thinking” at the expense of the company creditors.

Some key messages that came out of the two decisions, included:

  • Directors of companies in financial distress have a “Modified duty” that is owed to the interests of the company creditors as a whole and not to shareholders.
  • This modified duty arises from the point when the company is “Bordering on insolvency or an insolvent liquidation is probable.”
  • The standard expected (of directors) depends on the size and sophistication of the company.
  • Taking professional advice does not necessarily absolve directors of their risk of personal liability.

In short, the court is saying any delay in taking positive action to protect the company creditors may expose directors to risk of (what they termed as) equitable compensation awards being made on a personal liability basis.

At PBC we have always encouraged directors to seek early advice.  We appreciate how difficult it can be making that call and attending a meeting with our experienced team.  However, time and again, business owners have expressed a relief after consulting with PBC and many of those fears built up inside  are eased.

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

From the other side of the insolvency fence.

PBC business card in holder

So, your company went into liquidation and subsequently you receive a letter from solicitors acting for the liquidator, demanding you pay a sum of money in respect of various allegations of unfitness.  What do you do?

Well, the first thing you should do is consult with a solicitor that practices insolvency as they will be aware of the terminology and implications relied upon with insolvency litigation.

However, there has been an increasing demand upon insolvency practitioners (“IP”) to represent those confronted with insolvency-related claims.  Sometimes, assisting the instructed solicitor, while others have approached them directly.

At PBC we have (what is thought to be) a unique service, whereby we have the only person who is both an appointment taking IP while also an accredited mediator.  That, together with the Team at PBC having a wide and extensive range of experience, allows PBC to offer pragmatic and commercial solutions.

Two recent examples of where PBC have assisted have been:

Case 1.  A liquidator was pursuing the director for over £100,000 (although were willing to settle at £85,000).  Using our experience and knowledge, this claim has been extinguished.

Case 2.  PBC’s client was facing bankruptcy for a claim in excess of £200,000.  During negotiation, PBC put forward the realities of bankruptcy and, more importantly, the potential recovery the claimant may achieve.  Ultimately, a £75,000 settlement was agreed, resulting in the client retaining sufficient money to move on with their life.

It should be said, nobody at PBC has a right of audience to represent parties in court and solicitors are an invaluable aid in resolving disputes.  However, as PBC are demonstrating time and again, adding our practical experience and a reality check, often promotes settlement.

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

HMRC – Preferential financial recovery in insolvencies, but at what cost….

Analysis has found that HMRC has received an extra £14.4 million in tax owing from insolvencies since it regained its ‘preferential creditor’ status in December 2000.

The preferred status enables HMRC to be paid from a formal insolvency process ahead of unsecured creditors, which is effectively the general body of suppliers to that business. Given the forbearance from HMRC during Covid, the level of HMRC debt we often see with insolvency matters is significant, meaning asset realisations will need to be significantly greater to enable a return to the general body of suppliers.

In many instances, there will be no financial return at the bottom end and the best suppliers can hope for, if they don’t have bad debt insurance, is VAT bad debt relief on the sum not payable.

In our opinion, the preferential position HMRC find themselves in has the following consequences:

  • Some banks reducing the amounts they can lend to business and increasing the interest rates they offer on business loans.
  • Banks looking to mitigate exposure by way of invoicing discounting facilities, fixing their debt against the sales ledger. This is more costly than “normal” bank lending products, squeezing margins and reducing HMRC gain from corporation tax recoveries going forward from a viable business.  
  • Banks even more so, looking for personal guarantees from directors for business borrowings because if the ship goes down, they want a life raft to jump on to.  

In the overall scheme of things, the sum received through preferential status since December 2000 is not substantial for HMRC and we have no doubt that these funds would be far better off in the pockets of unsecured creditors as a whole. Indeed, it would be more beneficial if HMRC’s preferential status was abolished altogether, as it was in 2003, which, in turn, will allow greater lending opportunities for companies to recover, potentially avoiding a formal insolvency process while also increasing future tax receipts.

If you need any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Will I be banned from acting as a director?

It would be wrong to imply HMRC simply agree to TTP upon application. PBC Business recovery and insolvency practitioner

A common question we, at PBC, are asked by directors who are facing the tough decision of closing down their business.

It is understandable when the media report profile disqualifications, such as ex-England and Liverpool midfielder, John Barnes, being disqualified for 3 ½ years from April 2024.  However, dig into that story and you hear that his company went into liquidation owing HMRC £190,000 following a complete failure of addressing the tax affairs.

In order to answer the headline question, we must first look at some context.  In the 14 years ending with the Insolvency Services report for 2022/23 there have been in total 16,440 director disqualifications – an average of 1,174 disqualifications each year.  Over the past ten years, available records show the average number of corporate insolvencies stands at 16,724 per annum.

The above statistics may provide a degree of comfort, but if you end up being one of those disqualified, that is no consolation.  So, what must you avoid to ensure you do not join the likes of John Barnes?

The Insolvency Services have two primary duties to consider before deciding whether a director ought to face disqualification proceedings, namely

  1. Is it in the public interest?
  2. Does the conduct of a director merit allegations of being unfit?

Unfit conduct’ includes:

  • allowing a company to continue trading when it can’t pay its debts
  • not keeping proper company accounting records
  • not sending accounts and returns to Companies House
  • not paying tax owed by the company
  • using company money or assets for personal benefit

The reported numbers for 2022/23 amounted to 932, of which 812 were directors giving disqualification undertakings and only 120 being court orders.  Some of the headline figures are:

  • 185 treated HMRC unfairly (as opposed to other creditors).
  • 147 – Accounting matters.
  • 41 – transactions to the detriment of creditors (e.g. selling/transferring assets).
  • 459 – COVID-19 financial support abuse (primarily, inappropriate bounce back loan applications or the use of the funds when received).

A director (or the board of directors) should never be shy in taking advice, whether that is from the company accountant or solicitor.  Alternatively, if directors believe their company is insolvent, or likely to become insolvent, they should be consulting with an insolvency practitioner who can advise, based upon both current issues and experience.  In short, directors should never to assume but seek advice early.

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Unlicensed Insolvency Practitioners – wound up!

A week or so ago, we posted about being careful taking advice from unlicenced insolvency advisors. As they say, timing is everything, and on 15 July, The Insolvency Service published details of such an advisor being wound up by the court in the public interest.

https://www.gov.uk/government/news/court-winds-up-manchester-firm-offering-unlicensed-insolvency-practitioner-services

At PBC, we are aware some directors fear approaching an insolvency practitioner as they hear stories of the ramifications a director faces.  To the contrary, an insolvency practitioner will advise you of your options, duties, and will discuss potential issues with you.  Those who chance engaging an unlicensed advisor merely promote the likelihood of allegations of a breach of duty where personal liability for any loss suffered may arise.

If you need any advice or assistance on any corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.